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"To be honest, rate policy in this environment is a marginal factor
-- businesses think about possible returns on investments, and households will look at house price prospects," he said in a report. "We have almost exhausted traditional monetary tools now," Green said. "What happens next is mostly fiscal policy and encouraging the banks to lend." The amount that China's biggest banks must hold in reserve will fall by 1 percentage point to 15.5 percent, effective Dec. 5, the bank said. The minimum reserve for smaller banks would fall by 2 percentage points to 14.5 percent. The change frees up 360 billion yuan ($53 billion) in additional money for lending, according to Green. The rate cut will lower borrowing costs for state companies, which are expected to provide a big share of the promised investment in the government stimulus. A key issue will be whether banks are willing to lend more. They have tried to shield themselves from global turmoil and the slowing real estate industry by cutting back on lending to exporters, developers and small companies. "The degree of benefit realized from China's monetary stimulus will hinge on whether banks increase their lending to the most troubled sectors of the economy," Ulrich said. ___ On the Net: People's Bank of China (in Chinese):
http://www.pbc.gov.cn/
[Associated
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